Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020

Baroness Janke Excerpts

Tuesday 6th October 2020 Lords Chamber

[Baroness Janke (LD) [V]]

My Lords, I thank the Minister for his clear presentation, and speak in support of these regulations. We very much welcome the incentive the Government are providing here for people with problem debts to seek debt counselling. People with problem debt will have the chance to apply for a breathing space of 60 days, with a freeze on enforcement action, interest and charges. There will also be the opportunity—as the noble Lord, Lord Kirkhope, has said in detail—for people suffering a mental health crisis to apply for a moratorium to take stock of their position and not to face the stress of being threatened with recovery action.

Owing significant sums of money is a very frightening experience. I know because, when I was a local councillor, I met lots of people in this position, and it can be made very much worse by being pursued to repay debt, particularly when on a very low income. It is stressful and fraught with threats of insolvency, eviction and bailiffs. As other noble Lords have said, these have knock-on effects on other services. Creditors’ overzealous use of court orders, debt collectors and bailiffs has led to dreadful experiences and compounds the desperation for vulnerable people and the risk of debt spiralling out of control through fear.

The moratoriums will provide time and resources for debtors to receive debt advice and for a sustainable repayment plan to be agreed. The statutory debt repayment plans are a welcome part of these regulations, but they are not as yet included. What timeframe are the Government looking at for SDRPs? Through the extension of continued breathing space protections, SDRPs would give people a safe way to pay back their debts and reduce the harm that debt causes.

Will the Minister also let us know what plans there are to publicise the scheme? In one of the briefings we had, we heard that—certainly—half the people who approach debt counsellors say that they had been worrying about their debts for a year or more before seeking advice. However, nearly eight in 10 surveyed said they would have got advice earlier if they had known this could stop interest charges, collection and enforcement action. Six in 10 said they would have sought advice earlier if they had known it would deliver the temporary help from creditors that they needed. Therefore, it is important that the Government give a great deal of thought to how these new regulations will be publicised to the people who need them.

I wonder whether the Minister is confident that the service can cope, particularly with the further increased demand caused by the Covid-19 pandemic and the projected economic consequences. Many debt counselling organisations, such as the CAB, have ever-increasing client lists. Members of my family who work as volunteers for the CAB have drawn this growing problem to my attention. Cuts to local authority budgets have meant that funding for the service has fallen dramatically over recent years.

Can the Minister also tell us how realistic he considers the tight timescales for conducting reviews are, given the pressure on the agencies and the specific assessments that are needed for people suffering from mental health problems? What will happen to people who suffer long-term mental health issues as well as recurrent episodes, as the noble Lord, Lord Kirkhope, mentioned?

It is intended that these regulations will come into force on 4 May, and others have said that they would like the scheme to be brought forward, which I also support. However, if the scheme is to be successful, there needs to be protection for creditors. Creditor organisations will need to adapt their systems, policies and processes to ensure that they are able to fulfil the new regulations in order that no action is taken against individuals who are subject to a moratorium, no interest fees and charges accrue during it, debtors are not contacted regarding the debt during the period of the moratorium and no action is taken to challenge the grounds in applying for a moratorium that should be taken before the deadline to do so expires.

What plans do the Government have to support creditors to adapt their organisations to the new regulations? I know that the noble Lord, Lord Blunkett, said that a great deal has advanced in this area, but I would be interested to hear the Minister’s assessment, and I very much look forward to his response.